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7th Circuit rules in favor of attorneys in failed business investment

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A group of investors suing attorneys who worked on the establishment of two business entities – which later failed – were unable to show the 7th Circuit Court of Appeals that the attorneys owed the investors any legal duty.

The federal appellate court upheld summary judgment in favor of Beau Jack White and James Beaman and their firm Johnson Beaman Bratch Beal and White LLP on the investors’ claims of RICO violations, conversion, securities fraud, civil conspiracy and legal malpractice.

Real estate investor Chad Seybold hired White and Beaman to help him create two business entities, one of which would be partially owned by a group of investors. At a seminar with potential investors, White explained the concept of limited individual liability afforded by an LLC structure. Seybold told the potential investors that White represented one of the new companies being formed, he’s looking out for the investors’ best interests, and White is working for Seybold and the investors. White never clarified or corrected Seybold’s statements that he was not the attorney for the investors.

Investors sank more than $1 million in Seybold’s plan; about a year later he informed investors he was filing for bankruptcy and that their investments were gone.

The plaintiffs alleged that they each established an attorney-client relationship with the defendants, and even if they didn’t, the defendants still owed them a duty under the Indiana Rules of Professional Conduct, most especially Rule 4.3 laying out a lawyer’s responsibility when dealing with unrepresented persons.

The only attorney-client relationship formed was with the two businesses, the 7th Circuit ruled, rejecting the investors’ claim that White’s presentation at the seminar implied existence of the attorney-client relationship with each investor. The judges also didn’t think Seybold’s comments during White’s presentation implied an attorney-client relationship with investors. They also rejected the claims that a duty was implied under the Rules of Professional Conduct.

“Further, several plaintiffs’ subjective beliefs demonstrate that they understood that the defendants were acting on behalf of the investors as a group, not individually, and that the defendants’ involvement in the investment plan did not last beyond the companies’ formation. And the disclaimer included in the operating agreement that each investor signed should have alerted a reasonable investor that the defendants were not representing them in their personal capacities,” Judge Daniel Manion wrote.

The 7th Circuit also found the investors couldn’t rely on the statements made at the seminar to support their securities fraud or actual fraud claims.

“We need not address the merits of each independent tort … because the plaintiffs have failed to demonstrate that the defendants acted in concert with Seybold to commit any unlawful act, or that they accomplished a lawful purpose through unlawful means,” Manion wrote.



 

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  1. What is the one thing the Hoosier legal status quo hates more than a whistleblower? A lawyer whistleblower taking on the system man to man. That must never be rewarded, must always, always, always be punished, lest the whole rotten tree be felled.

  2. I want to post this to keep this tread alive and hope more of David's former clients might come forward. In my case, this coward of a man represented me from June 2014 for a couple of months before I fired him. I knew something was wrong when he blatantly lied about what he had advised me in my contentious and unfortunate divorce trial. His impact on the proceedings cast a very long shadow and continues to impact me after a lengthy 19 month divorce. I would join a class action suit.

  3. The dispute in LB Indiana regarding lake front property rights is typical of most beach communities along our Great Lakes. Simply put, communication to non owners when visiting the lakefront would be beneficial. The Great Lakes are designated navigational waters (including shorelines). The high-water mark signifies the area one is able to navigate. This means you can walk, run, skip, etc. along the shores. You can't however loiter, camp, sunbath in front of someones property. Informational signs may be helpful to owners and visitors. Our Great Lakes are a treasure that should be enjoyed by all. PS We should all be concerned that the Long Beach, Indiana community is on septic systems.

  4. Dear Fan, let me help you correct the title to your post. "ACLU is [Left] most of the time" will render it accurate. Just google it if you doubt that I am, err, "right" about this: "By the mid-1930s, Roger Nash Baldwin had carved out a well-established reputation as America’s foremost civil libertarian. He was, at the same time, one of the nation’s leading figures in left-of-center circles. Founder and long time director of the American Civil Liberties Union, Baldwin was a firm Popular Fronter who believed that forces on the left side of the political spectrum should unite to ward off the threat posed by right-wing aggressors and to advance progressive causes. Baldwin’s expansive civil liberties perspective, coupled with his determined belief in the need for sweeping socioeconomic change, sometimes resulted in contradictory and controversial pronouncements. That made him something of a lightning rod for those who painted the ACLU with a red brush." http://www.harvardsquarelibrary.org/biographies/roger-baldwin-2/ "[George Soros underwrites the ACLU' which It supports open borders, has rushed to the defense of suspected terrorists and their abettors, and appointed former New Left terrorist Bernardine Dohrn to its Advisory Board." http://www.discoverthenetworks.org/viewSubCategory.asp?id=1237 "The creation of non-profit law firms ushered in an era of progressive public interest firms modeled after already established like the National Association for the Advancement of Colored People ("NAACP") and the American Civil Liberties Union ("ACLU") to advance progressive causes from the environmental protection to consumer advocacy." https://en.wikipedia.org/wiki/Cause_lawyering

  5. Mr. Foltz: Your comment that the ACLU is "one of the most wicked and evil organizations in existence today" clearly shows you have no real understanding of what the ACLU does for Americans. The fact that the state is paying out so much in legal fees to the ACLU is clear evidence the ACLU is doing something right, defending all of us from laws that are unconstitutional. The ACLU is the single largest advocacy group for the US Constitution. Every single citizen of the United States owes some level of debt to the ACLU for defending our rights.

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